The value of life and its regional difference in China

Abstract

PurposeThe purpose of this paper is to estimate the value of a statistical life (VSL) in China using the hedonic wage model, and to explore the regional difference in VSL within the country.Design/methodology/approachUsing the hedonic wage regression, this paper estimates the compensating wage differential for incremental job mortality risk among Chinese workers. The implied VSL is derived for China and its different regions. The data is from the 2005 China inter‐census population survey, consisting of 1.3 million urban and rural workers. The authors also made important improvement in the model specification to explicitly address the missing variable issue in the previous studies.FindingsThe paper results indicate that the industry mortality risk has a significant impact on the wage rate. The implied VSL is 1.81 million RMB, a value substantially higher than previous estimates. The results also suggest a sizable urban‐rural difference, with the urban VSL being 4.3 times higher than the rural estimate. The strong urban‐rural inequality of income could be attributed to the segregation between the urban and rural labor markets.Practical implicationsThe paper findings indicate the importance of reforming the current workers' compensation standard and improving the institutional environment, as well as enhancing the labor protection in the rural labor market.Originality/valueThis paper is the first attempt to estimate the value of life in China using the census based data. The paper results contribute to the growing literature in obtaining comparable VSL estimates in the developing countries.